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04 May 2014

This is one in a series of posts designed to describe court decisions in plain English. For more detail and background on the legal issues, see the link to the case below. For similar posts, click here.

Background: Highmark, a Pennsylvania insurance company, filed suit against Allcare seeking a declaratory judgment of noninfringement, invalidity, and unenforceability of all claims of an Allcare patent. Allcare counterclaimed for infringement. The District Court entered final judgment of noninfringement in favor of Highmark. Highmark moved for an exceptional case finding with respect to Allcare and an award of attorneys' fees and expenses under 35 U.S.C. § 285. After reviewing the record, the District Court found the case exceptional. The Federal Circuitaffirmed one § 285 claim and reversed two others, holding that a District Court’s objective baselessness determination is reviewed “without deference.” The Federal Circuit denied rehearing en banc by a vote of six to five.

Issue: The question before the Court is whether a district court’s exceptional-case finding under 35 U.S.C. § 285 (which permits the court to award attorney’s fees in exceptional cases), based on its judgment that a suit is objectively baseless, is entitled to deference.

Holding: In a unanimous decision, the Supreme Court ruled that all aspects of a district court's exceptional-case determination under § 285 should be reviewed for abuse of discretion. Prior to Octane Fitness, LLC v. ICON Health & Fitness, Inc., this determination was governed by the framework established by the Federal Circuit in Brooks Furniture. Octane rejects the Brooks Furniture framework as unduly rigid and holds that district courts may make the exceptional-case determination under § 285 in the exercise of their discretion. The holding in Octane settles this case.